1. Field of the Invention
The present invention generally relates to co-branded and private label credit cards, and, more particularly, to a system and method for combined reconciliation of co-branded card promotion and settlement of private label card accounts.
2. Description of the Related Art
General purpose credit cards are cards that are issued to a cardholder by an issuer, typically a financial institution, and are part of a large financial network, such as a bank card network. Examples of bank card networks include the VisaNet™, MasterCard®, and American Express™ networks. Typically, a cardholder can use a general purpose credit card with any merchant that participates in a particular bank card network. Thus, the card is general purpose in that it is generally accepted by merchants that are members of the network, as opposed to a card that is limited in purpose insofar as it can be used only with particular merchants.
One type of general purpose credit card is a co-branded card. Co-branded cards are co-sponsored by two companies and have benefits and rewards designed specifically for their joint customers. Typically, co-branded cards are sponsored by both a financial institution and a merchant, or other business partner, and include the financial institution's name and/or logo and, often more prominently, the merchant's brand or logo.
Private label credit cards, on the other hand, are cards that are issued by an issuer to a cardholder, typically with only the merchant's brand or logo. Unlike general purpose credit cards, however, private label credit cards are usually not part of a bank card network. Instead, private label credit cards typically use the issuer's transaction network. Thus, private label cards are generally for use only with the merchant whose brand appears on the card.
Referring to FIG. 1, a block diagram of a general purpose credit card and private label credit card processing system is provided. The system includes merchant 10, acquirer 130, card issuer 160, and cardholder 180.
Issuer 160 extends credit to cardholder 180 in the form of credit cards and maintains an account for cardholder 180. Issuer may issue both general purpose credit cards and private label credit cards to cardholder 180, and bills cardholder 180 for purchases against cardholder 180's account(s).
In the context of general purpose credit cards, acquirer 130 contracts with merchant 110 to process credit card transactions conducted by that merchant. With private label credit cards, however, issuer 160, which may also function as acquirer 130, contracts with merchant 110 to administer merchant 110's private label credit card transactions.
When cardholder 180 presents its general purpose credit card to make a purchase, the transaction is processed by acquirer 130 through bank card network 140. Cardholder 180's card is swiped, and merchant 110 receives an authorization from issuer 160, indicating that the card number and transaction amount are approved. At this time, however, funds are not transferred among the participants, though a hold is typically placed on those funds.
When cardholder 180 presents its private label credit card to make a purchase, however, the transaction is processed by issuer 160 through issuers transaction network 150. Merchant 110 receives authorization for the purchase from issuer 160. Similarly, funds are not transferred to merchant 110 at this time, but the funds may be placed on hold.
After the transaction is authorized, merchant 110 stores the transaction with other transactions in a “batch.” A batch may simply be an electronic file that represents information regarding the transactions processed by the merchant, including, for example, credit card numbers, authorization codes, and purchase amounts. This is commonly in the form of an electronic file.
For general purpose credit card transactions, merchant 110 periodically sends the batch to its acquirer 130 to receive payment, i.e., to initiate settlement. Typically, this occurs on a daily basis at the end of the business day. After receiving the batch, acquirer 130 sends the transactions in the batch through bank card network 140, which debits issuer 160 for payment and credits acquirer 130. In effect, issuer 160 pays acquirer 130 for the transactions of its cardholders 180. Once acquirer 130 has been paid, merchant 110 receives payment. The amount merchant 110 receives is equal to the transaction amount minus a so-called “discount rate,” which is typically based on a percentage of the purchase amount. The majority of this fee, called the interchange fee, goes to issuer 160, but parts of this fee go to bank card network 140 and acquirer 130.
For private label credit card transactions, merchant 110 periodically sends a batch of private label transactions to issuer 160 to receive payment. Because issuer's transaction network 150 is used, issuer 160 typically does not charge an interchange fee for the transactions. In the industry, transactions that are processed through the issuer's own transaction network are known as “on us” transactions, as distinguished from those that are processed through one of the bank card networks, often referred to as “not on us” transactions. Issuers prefer “on us” transactions because they do not have to share the discount fee with bank card network 140 or possibly with acquirer 130 because an acquirer may not be necessary in the private label environment.
For both general purpose credit card and private label credit cards, issuer 160 may be paid by cardholder 180 after cardholder 180's statement is posted, and may also receive interest and other fees on any of cardholder 180's balances.